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Updated: Details On Proposed Competitive Supply Program At Tucson Electric Power

Eligibility Threshold, Program Cap, Costs, Difference From APS

April 3, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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Details are now available concerning Tucson Electric Power's proposed competitive supply program for large C&I customers

As exclusively reported by, TEP made the proposal, as directed by the Arizona Corporation Commission, as part of a newly filed rate case

TEP's proposal, know as Market Pricing-Experimental (MP-EX) or Rider 18, would be available for customers who have a peak load of 3000 kW or more at a single service point and are served under rates LPS-TOU or LPS-TOU-HV.

Participating Customers must have a load factor of 60 percent or more for a minimum of nine of the preceding 12 months.

As proposed, customer block purchases under MP-EX may not displace more that 50 percent of a customer's delivered energy based on the prior 12-month period. The use of block purchases, rather than a load following program, is one of the major differences versus the APS program (discussed further below).

Eligible Customers may aggregate loads if the loads are associated with the same corporate name ownership, and identity.

Total MP-EX program participation shall be limited to 60 MW of customer load, under TEP's proposal. A lottery would be established to award available space under the program to customers.

Under MP-EX, TEP shall enter into a Purchase Sale Agreement (PSA) with the Customer where the Customer commits to purchasing flat around-the-clock (7x24) blocks of market-based purchased power capacity and energy on a 12-month basis either through bilateral arrangement with a third-party Generation Service Provider or through a competitive RFP process conducted by TEP. The minimum PSA block sizes are 5000 kW. TEP will work with the customer to procure standard 7x24 blocks of market purchased power on a 12-month basis

In contrast, under APS's AG-X program, the alternative supplier providers firm power sufficient to meet the customer’s total load requirements, with provisions for scheduling (and deviations) and balancing

In testimony, TEP said that it is proposing its block approach for two reasons. "First, the Company believes this experimental program will minimize costs for participating customers by reducing the unnecessary overhead associated with day-ahead scheduling costs, imbalance charges and direct access service costs associated with metering and billing. Second, this type of approach minimizes costs for the Company. Currently, TEP doesn't have Settlements personnel and infrastructure in place to support a complex program like APS's AG-X. This simplified customer-centric approach would provide participating customers with the opportunity to take advantage of market-based alternatives while minimizing cost impacts on the Company and non-participating customers," TEP said

Customers under MP-EX would be responsible for all applicable TEP charges, except as follows:

• The unbundled Generation Capacity charges will not apply

• The Base Power Charge will not apply

• The Purchased Power and Fuel Adjustment Clause (PPFAC) will not apply

• A Capacity Reserve Charge of $5.00 per kW-month will be applied to the Customers PSA kW block size

• Customers will be charged a $1000 per month billing fee and a monthly settlements fee of $500 for each service point billed under the program

• Customers will be charged for line losses based on the Palo Verde Intercontinental Exchange (ICE) On-peak and Off-peak day-ahead index

Under MP-EX, the term of the contract with a Generation Service Provider and the customer shall be for not less than three years

Under the proposal, the customer will be obligated for all PSA payments and credit support obligations to the Generation Service Provider. A Generation Service Provider or its parent company must have at least an investment grade credit rating or demonstrate creditworthiness in the form of either a 3rd party guarantee from an investment grade rated company surety bond letter of credit, or cash in accordance with TEP's standard wholesale credit support rules, TEP proposed

Docket E-01933A-19-0028

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